May 31, 2003

NYS Justice Charles E. Ramos suggested last year that 625 million dollars (about $13,000 per hour) might be an excessive fee for the six law firms that helped settle the State’s case against the tobacco industry. Overlawyered.comcovered this surprising act of judicial bravery last July. The case was in the news again this week, as reported in the New York Law Journal and Law.com on May 28th (free, with a cumbersome registration). On Tuesday, a panel of appellate judges heard arguments, in the case of State of New York v. Philip Morris, as to whether Justice Ramos even has the power to raise the issue of unreasonable fees, especially at this time.

In a world where the ethical ban against excessive contingency fees is almost never enforced by ethics boards or judges (per Cardozo Law Prof. Lester Brickman), this could be a momumental case. But, I’m not getting my hopes up. Nobody in the case supported Justice Ramos, and he had to appoint his own Independent Counsel to defend his position. Even the normally toughminded and consumer-friendly Attorney General, Eliot Spitzer (featured on Sixty Minutes last Sunday for battling Wall Street ripoffs), opposed Justice Ramos strenuously. Let’s face it, there are immensely powerful interests who want Justice Ramos put in his place. If the NY 1st Department Appellate Court wants to overturn Justice Ramos, the facts present many procedural reasons that could be used.

Usually, it’s the “little guy’s” legal fees that bother me, not fees awarded to lawyers for sophisticated clients like New York State. This case interests me, however, because the real clients are the residents of the State. Even more important, if $13,000 per hour isn’t enough to warrant a close judicial look or review by an ethics board (long before it got to Justice Ramos), I have to wonder why the legal profession even has a ban on excessive fees. Why not just limit the rule to actually stealing your client’s money or intentionally padding a bill?

Two Cents

from (the Editor’s alter ego) Jack Cliente: What I wonder is where the elite consumer-lovers are when it comes to preventing scandalously high lawyer fees, which come out of the victims’ hides one way or the other. Why wasn’t the Ramos story important enough for the New York Times to cover this week? Have campaign contributions to Democratic politicians, and large donations to liberal nonprofit organizations, neutered all of the consumers’ watchdogs?

2 Comments

Hello and welcome to the blawg neighborhood. I’ve resided a MyShingle.com for almost six months now; my site is intended to promote the perspective of solo and small firm lawyers and help those who want to start a firm.

Anyway, you can view my take on the Common Good fee cap proposals (I actually read one of the petitions and linked to it) http://myshingle.com/article.pl?sid=03/05/09/0358257&mode=thread and Connie Mack’s Florida proposal here http://myshingle.com/article.pl?sid=03/05/09/0358257&mode=thread (hope I didn’t reverse these links). By the way, though I agree with you completely about the excessive nature of the tobacco fees (actually, disagreed with the whole premise of the litigation, but that’s another story) as well as fees generally in many class actions, I find the Common Good’s fee cap proposal to be somewhat mean spirited in that it goes after the piddly little “penny ante” cases that help smaller clients but don’t have much impact on the broader legal system. Also, as you point out in your article, clients can always pay by the hour to have an attorney take a case. And I have offered this option to clients (particularly in cases of mediocre value) and none have ever agreed to even front their costs, let alone pay fees out of pocket. The bottom line is that many clients don’t want to put their own money at risk and if that’s the case, attorneys should get something extra for taking the risk instead. (This is all discussed in more detail in my posts). Good luck with your web log, I will add it to my aggregator; looks like it will have some interesting material. Carolyn Elefant

Thanks for the welcome and taking the time to share your opinion. Here are my quick reactions (1) I don’t believe the Common Good proposal is trying to reform the whole system (which is why it is not tort reform, it’s legal ethics reform). The proposal is trying to correct the basic flaw of using a Standard Contingency fee for “easy” cases as well as for the tougher cases — compared to how much time and risk the lawyer had in the case, he/she is taking an unfairly large amount of the victim-client’s damages. The personal injury plaintiff’s bar has turned the maximum percentage fee allowed in most jurisdictions (the percentage meant to cover the most risky and difficult cases)into the fee it demands in virtually every case.
(2) Clients gripe plenty about how much lawyers take out of their damages, but they don’t file formal grievances because almost all Americans believe there is a rule setting the Standard fee level (be it one-third or 40%) or a lawyer conspiracy to impose it.
(3) Yes, clients have the RIGHT to pay by the hour, but almost none of them KNOW they have that right. Despite their fiduciary obligations, p/i lawyers do not inform clients of the right. I strongly support a specific ethical rule that requires an attorney to inform the client of that right — and the likely financial impact of various fee options — before entering into a contingency fee contract. ABA Formal Ethics Opinion 389 (1994) specifically imposed those requirements and was totally ignored by the PI Bar, which instead has written the parts of the Model Rule 1.5 that clearly supported the requirements in Opinion 389 out of the New ABA Model Rules.
(4) I have found that the relatively few attorneys who tell an injury victim that they could pay by the hour do so when the case is so bad the lawyer won’t do it on a contingency (so obviously the client won’t want to pay by the hour and the system works to weed out the bad cases). The test for whether the lawyer is looking after the client’s interests first is whether the lawyer tells the client in an easy or slamdunk case, with big bucks a near certainty, that the lawyer will accept being paid by the hour rather than insisting on taking the stardard percentage for what will likely be relatively little work. At that point, the client and lawyer might negotiate a fixed hourly fee or a contingency percentage based on the lawyers good faith estimate of the risk and time involved. Check out my article “Pricey Contingency Fees” [ http://www.prairielaw.com/articles/article.asp?channelId=29&subId=124&articleId=1336 ] for a fuller presentation of these issues.

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